Navigating ESI and Workmen's Compensation: How to Handle Employee Coverage Conflicts in Our Hotel?

Dear Sir, We are running a 3-star hotel with a total of 75 staff, but we are showing only 40 staff in ESI & PF. However, all the staff have the same salary and benefits. We have two employees, one is "X" and the other is "Y". X comes under the purview of the ESI Act, but Y does not. My question is:

1. If any accident or incident happens to Mr. Y, can he claim under the Workmen's Compensation Act?

2. Can the ESI and Workmen's Compensation Act be implemented simultaneously in any establishment? For example, 40 staff come under ESI and the rest come under WC.

I have already mentioned that we are running a 3-star hotel. We have received a letter from ESI stating that we must pay an amount of Rs. 27,898/- for the wages paid to the head load workers. The head load workers have their own welfare board, and they remit 27% of their salary to the welfare fund board. This welfare fund is far better than the ESI Corporation. Is it correct to remit the above amount to the ESI Corporation? We utilize the head load workers only for unloading the beverages from the lorry to our store. We have received a letter from the head load workers' union stating that they are not paying any amount to ESI, but they are contributing to their welfare fund.

Please clarify the above matters at the earliest.

Regards

Dear Mr. Beeyardas, you have stated that you have 75 staff, and out of this, 40 staff are enrolled in ESI and PF, and all have the same salary. This indicates that although all 75 staff should be covered by ESI and PF, not all of them are currently covered. It has been decided by the Supreme Court in CASE NO.: Appeal (civil) 8623 of 2002, where the PETITIONER is BHARAGATH ENGINEERING and the RESPONDENT is R. RANGANAYAKI AND ANR. (DATE OF JUDGMENT: 20/12/2002), that "It is to be noted that the crucial expression in Section 2(14) of the Act is 'are or were payable.' It is the obligation of the employer to pay the contribution from the date the Act applies to the factory or the establishment. In Harrisson Malayalam Pvt. Ltd., [1993] 4 S.C.C. 361, it was held that the employer's claim that employees are not traceable or there is a dispute about their whereabouts does not absolve the employer's obligation to pay the contribution. In 5.7. Corporation v. Hotel Kalpaka International, [1993] 2 SCC 9, it was established that the employer cannot argue that not deducting the employee's contribution or the closure of the business exempts them from liability. This stance was reiterated in Employees' State Insurance Corporation v. Harrisons Malayalam Limited, [1998] 9 SCC 74. Given this, the date of contribution payment is not crucial. Section 38 of the Act imposes a statutory obligation on the employer to insure its employees. Consequently, the commencement date must align with the employee's start date of employment.

When viewed against the statutory provisions mentioned above, the payment or non-payment of contributions, as well as actions or inactions before or after the accident date, are essentially inconsequential. The deceased employee was clearly an 'insured person,' as defined in the Act."

This judgment clarifies that even if the worker is not registered with ESI, they are considered an insured worker entitled to the Scheme's benefits. Therefore, ESI may request you to pay the contribution for that worker. Concerning the letter from the head load workers, they do not have the authority to override legal provisions.

With regards,

I would like to add that in Employees State Insurance Corporation v. Malhotra and Co., Chandigarh, (1981 Lab I.C. 475) and Regional Director, E.S.I. Corporation v. P. R. Narahari Rao, (1986 Lab I.C. 1981), the Punjab and Haryana High Court and Kerala High Court respectively have categorically stated that there exists a distinction between employees 'employed' and 'engaged'. The head load workers are engaged to do a particular work and they are free to take up any other work apart from what has been given to them by the establishment (the Hotel).

The Punjab and Haryana High Court has observed that "a clear distinction must be made between a casual worker and a person engaged for a specific item. The distinction is between employment and an engagement. If a person is engaged casually for a process unconnected with the operations of the establishment or some work which does not form an integral part of such operations, he will not be an employee. There is no relationship of employer and employee. The employer has no control to take disciplinary action. He would only be engaged for the purpose." As such, the head load workers cannot be considered as workers even casually employed by the establishment and therefore, contribution cannot be claimed by the ESIC in respect of them. The Kerala High Court has also given similar wordings as follows:

"The oft-repeated distinction is that between an 'employment' and 'engagement'. If a person is engaged casually for a process unconnected with the operations of the establishment, or some work which does not form the integral part of such operations, he may not be an employee since there would be no employer-employee relationship between them only in consequence of the casual engagement for purposes unconnected with the main operations of the establishment. On the other hand, if a person is employed, though casually and for a very short period of time, but in connection with the processes which are integral and connected with the incidental or preparatory to the operations of the establishment, then he may be an employee entitled to coverage under the Act. The Courts have made a still further distinction to the effect that in case of employment, however short it be, the employer shall have the right of disciplinary control, right of supervision and oversight of the quality of and the manner in which the work is to be performed, etc. Further ramifications have been evolved by the decisions to the effect that the employer shall have control over the employee in the sense that the latter shall be obliged to report for duty at specified working hours and seek and obtain permission for absence on any account, and that the employer shall have the power to grant or refuse leave, etc."

I feel that if you point out the above cases, you can avoid payment of ESI contribution in respect of head load workers. In respect of others who are ordinarily engaged for the operations connected with the business, you are bound to contribute.

Regards,
Madhu.T.K